Asian stock markets may experience positive momentum, following an upbeat performance on Wall Street. U.S. and European stock markets, particularly in the tech sector, have witnessed notable gains, propelling the S&P 500 to new peaks. This bullish market trend has been underpinned by several dovish macro drivers. Notably, the European Central Bank has revised its inflation forecasts downward. As a result, regional markets might attract capital inflows, especially as the U.S. dollar faces a widespread sell-off. In contrast, the Japanese yen has strengthened considerably, fuelled by growing anticipation of a potential interest rate hike by the Bank of Japan, driven by rising wage growth data.
Investors are now turning their attention to the forthcoming U.S. Non-Farm Payrolls (NFP) report, as the Federal Reserve enters a quiet period ahead of significant data releases next week, including U.S. Consumer Price Index (CPI), Retail Sales, and Producer Price Index (PPI) figures. Furthermore, China’s trade statistics for January and February have exceeded expectations, signalling a positive turn in global trade dynamics and bolstering hopes for economic recovery initiatives. The February U.S. nonfarm payrolls are projected to reflect a deceleration in job growth, with the unemployment rate likely to remain unchanged. Recent indicators, such as a slight uptick in weekly jobless claims and a less optimistic consumer perspective on labour market conditions, hint at a slowing labour market. Analysts also anticipate a moderation in wage growth in the February data, mirroring broader trends that could potentially enable the Federal Reserve to adopt a more dovish monetary policy stance going forward. However, any unexpected findings in the data, particularly with regard to headline revisions, could trigger risk-averse movements, especially in U.S. equities, given their proximity to record highs.
